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Guide to Debt Reduction

Rates and fees last updated on

Understanding debt reduction is the first step to improving your finances.

There are some fast and easy ways people can access credit, but this also leads to people getting into debt. It's common for people to have multiple debts, whether it be credit cards, mortgages or personal loans. Unfortunately, having money owing to multiple different lenders leads to debt getting out of hand due to the inability to manage the numerous repayments, fees and interest rates. If you have found yourself becoming overwhelmed with debt, then it's time to think about ways to reduce it. No matter what your personal financial situation, there are ways you can reduce your debts and get back in control of your money.

Understanding debt

No two debts are the same and because of this, there is no one surefire way to reduce your debts. One of the main problems people run into is having too many separate debts to manage. If you take out a car loan, have multiple credit cards or a mortgage, then managing your repayments can get complicated. The first thing to do is to sit down and work out all of the different lenders you owe money to, how much money you still owe, what you are paying in interest and how much your repayments are. Then you can get a realistic amount which you're putting towards your debts each month.

When you break all of these debts down, you can identify the lenders to which you are paying the highest interest rates and fees. For example, you may have a couple of credit cards with higher interest rates than the others, or you may be paying more in unsecured personal loan fees and interest than you are for a car loan. By understanding your debts you can decide on an appropriate strategy to manage them. No matter how many separate debts you have to how many lenders, there are several debt reduction strategies which can help you take control of your repayments and better manage your debt. Take a look below at the debt reduction strategies which you may want to consider.

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Consolidating your credit card debt

If you have multiple debts, then consolidating them may be a good option for you. Consolidating your debt reduces the risk of missed repayments and allows you to budget your finances more effectively because you have less interest and fees to calculate.

Consolidating your debts involves incorporating all of the money you owe into one loan. If you have a personal loan, the interest rate for that loan may be lower than the rate on your credit card. If you want to reduce the amount of interest you are paying you can consolidate your credit card debt into your personal loan. You can also consider consolidating your credit card debt into your home loan.  If you have equity in your home (a portion of your home that has been paid off), then you could apply for an equity rate loan which will allow you to draw money against that equity. Compare some of the debt consolidation loans in the table below.

Who can you consolidate debt with: Personal Loans

Rates last updated July 26th, 2017
Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Application Fee Monthly Repayment
Citi Personal Loan Plus
Borrow up to $75,000. All approved applicants will receive the advertised variable rate of 11.99% p.a.
From 11.99% (variable) 12.48% $5,000 3 to 5 years $0 ($199 fee waived) Go to site More
Latitude Personal Loan (Secured)
Can be used for whatever purpose: renovating, buying a car, booking a holiday. Funds can be in your account in as little as 24 hours.
From 12.99% (fixed) 14.2% $3,000 2 to 7 years $250 (Loans under $4000 - $140) Go to site More
QT Mutual Bank Personal Loan
You can use this personal loan to buy just about anything: a new boat, home renovations, a holiday or even to consolidate existing debt. Only available to Queenslanders
From 12.95% (variable) 13.54% $3,000 5 years $395 (establishment fee) Go to site More
bcu Unsecured Multipurpose Loan
A flexible unsecured or secured personal loan with a competitive rate.
From 8.94% (variable) 9.85% $4,000 1 to 5 years $200 Go to site More
Swoosh Finance
A secured loan you can apply for in 10 minutes that gives you up to 12 months to repay. Note: Max loan amount $4,600. Fees and charges included in repayment.
From 48% (variable) 66.04% $2,100 1 to 2 years $400 Go to site More

If you have multiple credit cards with different amounts owing on each one, then you might be able to move the balance onto another card with a 0% p.a. balance transfer rate. You can also pick a card with a lower interest rate than your existing rates to save money. When choosing credit cards you should compare your options online to find one that best suits your financial situation. Take a look at some of the 0% p.a. balance transfer credit cards available in the table below.

Who can you consolidate debt with: Credit Cards

Rates last updated July 26th, 2017
% p.a.

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Name Product Balance transfer rate (p.a.) Purchase rate (p.a.) Annual fee Interest Saved Product Description
NAB Premium Card - Exclusive Offer
0% p.a. for 24 months
19.74% p.a.
$90 p.a.
Exclusive to, enjoy a no fee, long-term balance transfer offer with platinum privileges, including travel insurance.
HSBC Platinum Credit Card
0% p.a. for 22 months with 2% balance transfer fee
19.99% p.a.
$99 p.a.
Earn 1 Reward Point per $1 of eligible spend and receive complimentary travel and purchase protection insurances.
St.George Vertigo Visa
0% p.a. for 14 months
13.24% p.a.
$0 p.a. annual fee for the first year ($55 p.a. thereafter)
Receive up to 55 days interest-free on purchases and the ability to make contactless payments with Visa payWave technology.
Citi Rewards Platinum Credit Card
0% p.a. for 24 months with 1.5% balance transfer fee
20.99% p.a.
$49 p.a. annual fee for the first year ($149 p.a. thereafter)
Apply by 31 July 2017 to receive a long-term BT offer, to earn Citi Reward Points on everyday spend and receive complimentary travel insurance.
Virgin Australia Velocity Flyer Card - Exclusive Offer
0% p.a. for 18 months
20.74% p.a.
$64 p.a. annual fee for the first year ($129 p.a. thereafter)
Apply by 31 July 2017 to earn bonus Velocity Points for the first three months and a $129 Virgin Australia Gift Voucher each year.
Bank of Melbourne Vertigo Platinum
0% p.a. for 20 months
12.74% p.a.
$99 p.a.
Get a range of complimentary insurance covers, access to a 24/7 concierge and up to 55 days interest-free on purchases.
NAB Low Rate Credit Card
0% p.a. for 16 months with 2% balance transfer fee
13.99% p.a.
$59 p.a.
Receive up to 55 days interest-free on purchases, special offers from Visa Entertainment and Tap and Pay capabilities.
ANZ Platinum Credit Card - Exclusive Offer
0% p.a. for 12 months
0% p.a. for 3 months (reverts to 19.74% p.a.)
$0 p.a. annual fee for the first year ($87 p.a. thereafter)
Receive a low introductory offer of 0% p.a. on purchases for 3 months and 0% p.a. on balance transfers for 12 months.
NAB Low Fee Card
0% p.a. for 16 months with 2% balance transfer fee
19.74% p.a.
$30 p.a.
Receive complimentary purchase protection insurance, special offers from Visa Entertainment and up to 44 days interest-free on purchases.
St.George Vertigo Platinum
0% p.a. for 20 months
12.74% p.a.
$99 p.a.
Offers complimentary travel insurance, complimentary purchase insurance and access to a 24/7 personal concierge service.

Compare up to 4 providers

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The Snowball Method


This method is an effective way to reduce debts. The Snowball Method involves paying off your smallest debt balances first, regardless of interest rates and fees. So if you have a low balance on a card that is charging you the lowest interest, you would pay this off first before thinking about a debt where you might be charged higher interest rates and a higher amount owing. Even though you may end up paying more by using this method, the sense of achievement that comes from paying off your smaller debts gives you the motivation you need to deal with the larger debts. Dealing with debt comes down to you and this method gives you the confidence to tackle your larger debts by giving you small accomplishments along the way.

The snowball method also prepares you for paying progressively bigger debts. When you tackle your first debt, you make the minimum repayments plus whatever else you can afford. Once you've paid this off, you move to the next debt and add whatever you were paying on your first debt to the minimum amount you're paying on this debt. This way you slowly scale up your repayments.

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Reducing loan debt

People are borrowing money more and more in order to meet their financial goals, but this can lead to mounting debts which are difficult to manage. Luckily, there are ways you can pay off your loans and get in control. One way to help pay off your loan faster is to make regular additional repayments. If you budget to make these payments you can reduce the interest you're paying and get out of debt sooner. For example, if you have a home loan, you can schedule your repayments to be bi-monthly. Interest is calculated daily by the banks so you will start seeing improvements in your debt very quickly.

Another way to get your loan under control is to make a lump sum payment. If you have money in a savings account, receive money as a gift or from a trust, or just budget to have some extra money at the end of the year, then you can make a lump sum payment towards your loan. These payments reduce your loan amount significantly and you will see the effect immediately. This is because when you make lump sum payments the amount goes directly towards reducing the principal loan amount, which in turn reduces your interest. This interest reduction has the same motivating effect that the Snowball Method has in motivating you by making a huge step towards getting out of debt.

An offset account can also help you reduce the size of your home loan. This account works like a regular transaction account, but any funds which are held in this account 'offsets' the amount of interest you pay off your mortgage. So the more you put in your offset account, the more your principal loan amount will be 'reduced' and the lower your interest. This account also encourages you to save more money and not to spend it. The account can be used as a savings account with options to make regular deposits into it and transactions out of it to access your money.

Learn more about offset accounts

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Reducing your spending


This method of debt reduction may seem obvious, but it is often overlooked when people are faced with mounting financial problems. When you are deciding on a debt reduction strategy you should also sit down and look at the money you are still spending. Look at your outgoing expenses and identify ways to save money, even if you only adopt these strategies for a short period of time.

For example, could you make your lunch at home for the next few months instead of buying it at work in order to reduce spending? You could also have your morning coffee at home instead of buying it out, or you could leave your car at home and catch public transport to work to save on petrol and parking. Any money you save can be put into paying off your debt, which in turn saves you money off interest and helps you to reduce your debt sooner.

Top 10 budgeting tips

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Debt relief

If you find yourself struggling with debt and unable to manage it on your own, there are financial institutions that can help. For example, if you lose your job and have a loan at one of the big four banks you could be considered for a repayment holiday which can help you save money until you get back on your feet. If you don't qualify for a full holiday you may be able to increase your loan terms or reduce your repayments.

There are also debt reduction agencies that specialise in helping Australians manage their debts. You should be wary of these companies and ensure that you are dealing with a reputable agency before signing up with them. But keep in mind a lot of people have found success with some of these agencies who were able to help and negotiate with lenders to reduce repayments and overall money owing.

Dealing with debt can be difficult and often takes a lot of hard work, but by adopting any of these debt reduction strategies you may see your debt paid off sooner than you expected.

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Isaiah James Peralta

Isaiah is a Personal Finance Publisher for, when comes to Credit Cards and Travel Money, you're speaking his language. His forefront value is genuine help, and empowering users to make better informed decisions is almost quite simply, second nature.

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